People Rely on Retirement Accounts, Home Equity for Retirement Income

Retirement investments such as 401(k)s and individual
retirement accounts (IRA)s as well as home equity account for nearly half of
all assets American families depend on for retirement outside of Social
Security benefits, according to new research by the Employee Benefit Research
Institute (EBRI).

Moreover, families without such accounts typically have low
asset levels, EBRI reports. According to the research, among working heads of
families between the ages of 25 and 64 who don’t have a retirement account, 79.6%
have financial assets less than $10,000. Only 13.1% of those with one have
these kinds of asset levels.

These accounts are also more popular among older workers. EBRI finds that the
percentage of heads of households between the ages of 25 and 34 that have retirement accounts is 50.4%. That figure grows to 71.4% for those families with a head
ages 55 to 64.

Debt levels are sharply lower for those with individual accounts: For
all families with working heads ages 25 to 64, the median debt-to-asset ratio is
33.4%. However, for families with working heads ages 55 to 64, the median debt-to-asset
ratio is 13.4% for families with “individual account” (IA) assets compared with
34.2% for families without IA assets.

One-half of all of all families that have IA assets plus
home equity rely on these for more than 78.2% of their retirement savings
outside Social Security.

“The data show
that it is overwhelmingly the case that individual account retirement plan
assets plus home equity represent almost all of what families have to use for
retirement expenses outside of Social Security and traditional pensions,” says
Craig Copeland, senior research associate at EBRI and author of the report.
“Those families without IA assets typically have very low overall assets, so
they have almost nothing to draw from for retirement expenses (outside of
Social Security).”

The data comes from the Federal Reserve’s Survey of Consumer
Finances (SCF). The full report, “Importance of Individual Account Retirement
Plans and Home Equity in Family Total Wealth,” is published in the May 16, 2017, EBRI Notes, available online at www.ebri.org